Barbara's Boutique wants to know what it takes to have $20,000 in operating income.If her selling price is $20,variable cost is $8 and fixed costs total $40,000,how many

Question

Quizplus · Accepted Answer

To find the breakeven point, we need to use the formula:

Breakeven Point = Fixed Costs / (Selling Price - Variable Cost)

Substituting the given values, we get:

Breakeven Point = $40,000 / ($20 - $8) = 2,000 units

To make a profit of $20,000, we need to sell 2,000 + (Profit / Contribution Margin) units.

Contribution Margin = Selling Price - Variable Cost = $20 - $8 = $12

So, Profit / Contribution Margin = $20,000 / $12 = 1,667 units

Total Units required = 2,000 + 1,667 = 3,667 units

Therefore, the answer is not given in the options. However, the closest option is C) 5,000 units.

Barbara's Boutique Wants to Know What It Takes to Have